This key reading, which measures the change in prices paid by consumers for goods and services, showed that prices increased 0.1% versus the previous month, and 7.1% compared to a year ago. Both figures came in slightly lower than expectations, and down from October’s readings of 0.4% and 7.7%, respectively. Meanwhile, the “core” CPI, which excludes food and energy prices, increased 0.2% for the month, and 6% on an annualized basis.
Investors appeared hopeful that the Federal Reserve will ease up on the monetary brakes. Specifically, as part of the central bank’s efforts to bring down inflation, it has raised its target overnight lending rate by three-quarters of a percentage point over each of its last four sessions. The last meeting for the year wraps up this Wednesday, and the consensus is calling for a half-point increase this time around. Beyond the rate announcement, traders will be eager to hear Chair Jerome Powell’s latest economic outlook during the press conference after the policy meeting.
No matter what today’s inflation report showed, the lead bank has appeared determined to keep raising interest rates even further, likely maintaining them at elevated levels well into next year. Hopefully, these steps will have the desired effect of taming the decades-high inflation while also avoiding the so-called “hard landing”, whereby the economy could endure a meaningful recession.
As we approach the opening bell, U.S. stock futures have moved sharply higher in the wake of the CPI inflation report. In overnight trading, markets in Asia were mostly up, while the European indexes have moved further into positive territory. Meanwhile, oil futures have also moved higher, with West Texas Intermediate up about 1.5%, to around $74.30 a barrel.
Stocks got the week off to a positive note, with the Dow Jones Industrials leading the charge higher Monday, rising 528 points or 1.6%. The broader S&P 500 also had a good day, gaining 56 points (+1.4%), and the NASDAQ wasn’t too far behind, rising 139 points, or 1.3%.
The economic calendar for the rest of this week includes retail sales figures for November. The report, due out Thursday morning, is expected to show about a half-point decline for the month, versus the 1.3% increase generated in October. Those data are unlikely to move the needle very much coming after the official Federal Reserve announcement and follow-up press conference on Wednesday afternoon.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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